Model FSA may be placed for Coal India board nod in Sep

The model fuel pact which CIL would sign with power firms with changes may be placed for approval in the PSU's board meeting likely early next month.

The development comes in the wake of some of the members on the board of Coal India Ltd (CIL) seeking some more time to go through the clauses of both the model fuel supply agreement (FSA) and the side agreement minutely.

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"In the last board meeting held on August 13, it was decided that two to three members on the board of CIL would minutely go through the model FSA and a side agreement which describes large decisions like coal price pooling mechanism," a source close to the development said.

"Due to shortage of time the board members could not go through the clauses closely, therefore it was decided to place the model FSA and side agreement after thorough examination for approval in the next board meeting of CIL likely next month," the source added.

After the board meeting on August 13, when CIL Chairman and Managing Director S Narsing Rao was asked if the Board has approved the model FSA with significant changes, he said, "Today, it is not in a sign-able form".

CIL in its board meeting held on August 7 had agreed to paying penalty between 1.5 per cent and 40 per cent on failing to supply the committed quantity of the fuel to power firms.

On price-pooling, Rao had said if it is implemented, all the power consumers would have to bear the impact, adding that, however, it should be neutral to CIL.

CIL has reached a consensus on supplying a minimum of 80 per cent of the contracted quantity to power firms.

The issue of penalty has been a bone of contention as power firms, led by NTPC, had been opposing the "meagre" penalty clause in the earlier FSA of only 0.01 per cent, that too applicable after three years of shortfall. They refused to ink to fuel supply agreement.

Of the committed 80 per cent of the assured supply, CIL would meet 15 per cent through imports and 65 per cent through domestic production. It is estimated that CIL would need to import 20 million tonnes of coal this year to meet the demand of power companies.

To offset the impact of high import costs, the Planning Commission had said that CIL should adopt a pooling formula on prices by combining rates of imported and domestic coal.

The company said the board in-principle approved pooling of prices. So far, only 29 power companies, including Lanco and Adani have signed FSAs with CIL.